Ageas has begun exclusive negotiations with Saga plc to form a long-term partnership with Saga Services Limited (SSL), a UK provider of products and services targeting people over 50.
The discussions involve a potential acquisition of Saga’s underwriting business, Acromas Insurance Company Limited (AICL), which would become part of Ageas’s operations. This proposed transaction aligns with Ageas’s Elevate27 strategy, which aims to strengthen its non-life business across Europe and target the expanding over-50s demographic, a key market segment where both Ageas and Saga have significant expertise.
Expected Outcomes of Ageas-Saga Negotiations
The deal would allow Ageas to increase its presence in the UK personal lines insurance market, which is seen as a core part of the company’s European portfolio.
Under the deal, Ageas UK would enter into an affinity partnership with SSL, Saga’s insurance broking business, which generated over £479 million in gross written premiums (GWP) in the year ending July 31, 2024.
Commenting on the negotiations, Ageas CEO Hans De Cuyper emphasised that the over-50s demographic is an important segment for the company, and this transaction would allow the company to build on existing strengths.
Ant Middle, CEO of Ageas UK, reaffirmed the company’s commitment to offering customers competitive products while drawing on its expertise and investment in operational and customer service excellence.
The proposed transaction includes an initial cash payment of £147.5 million, subject to standard completion adjustments, with a potential contingent payment of up to £60 million depending on policy volume and profitability milestones.
The completion of the acquisition of AICL will depend on finalising transaction documentation and securing regulatory approvals.
At the start of 2024, AICL reported unrestricted tier-one capital of £83 million and a solvency capital requirement of £54 million. The deal is expected to result in a 5% reduction in the solvency ratio for Ageas Group. However, it will not impact the group’s current share buyback programme.
Saga’s business profile
Saga is a well-known brand in the UK, catering primarily to customers aged 50 and over. Established over 70 years ago, the company offers a range of products and services, including insurance, cruises, and financial services.
While Saga’s travel business has experienced growth, particularly in the cruise sector, its insurance operations have faced challenges due to rising costs in the home insurance market.
Saga plc CEO Mike Hazell commented that the agreement would enable the company to serve more customers in the over-50s market and drive growth in a capital-light way.
Details of the proposed Deal
If completed, the affinity partnership between Ageas UK and SSL would run for 20 years, with plans to launch by the end of 2025.
Ageas would pay an upfront consideration of £80 million at the time of launch. In addition, Saga may receive up to £30 million in 2026 and another £30 million in 2032, provided that certain policy volume and profitability targets are met.
SSL will continue to earn commissions on the GWP generated throughout the duration of the partnership.
For the acquisition of AICL, Ageas UK would pay £67.5 million, subject to adjustments, with completion expected by the second quarter of 2025. The deal is contingent on regulatory approval.
